Notes Payable |
12 Months Ended | |||||||||||||||
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Dec. 31, 2024 | ||||||||||||||||
| Notes Payable | ||||||||||||||||
| Notes Payable | Note 5: Notes Payable
On February 7, 2020, the Company entered into the Agreement with Corbel pursuant to which, among other things, the Company issued to Corbel the Senior Note in the initial principal amount of $8.0 million. The Company used the net proceeds of the Agreement as follows: (i) $4.2 million was used to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 was used to repay the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been extended; (iii) debt issuance costs; and (iv) the remaining net proceeds were used for working capital or other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations.
The Senior Note prior to the Amendment was bearing cash interest of SOFR, as defined in the Agreement, plus 7.75% per annum. In addition, the Senior Note required PIK Interest of 3% per annum, which was being added to the principal amount of the Senior Note. After the Amendment, cash interest will be SOFR, as defined in the Agreement, plus 9.0% per annum payable in arrears on the last calendar day of each month, however there will no longer be any PIK interest accruing after the date of the extension. Interest is payable in arrears on the last calendar day of each month. The Senior Note now requires principal payments of $91,667 per month beginning in May 2025.
In conjunction with the borrowing under the Senior Note, the Company issued to Corbel the Original Corbel Warrant to purchase up to 2,250,000 shares of Common Stock. The Original Corbel Warrant entitles Corbel to purchase from the Company, at any time or from time to time: (i) 1,200,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 1”), (ii) 900,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 2”), and (iii) 150,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 3”). Upon extension of the Senior Note, the Company issued an additional Warrant (the “New Corbel Warrant”) to Corbel to purchase up to 750,000 additional shares at an exercise price of $0.10 per share. Cashless exercise is only permitted with respect to Tranche 3 of the Original Corbel Warrant and the New Corbel Warrant. Corbel has the right, within eight months after the issuance of any shares under the Original Corbel Warrant or the New Corbel Warrant, to require the Company to repurchase such shares for cash or for put notes, at the Company's discretion. The Original Corbel Warrant expires on the tenth anniversary of the date of its issuance. The New Corbel Warrant expires on the fifth anniversary of the date of its issuance. The Company was in compliance with the amended agreement as of December 31, 2024. The Original Corbel Warrant had a fair market value of $540,650 and $538,822 as of December 31, 2023 and 2024, respectively. The change in fair value of the Original Corbel Warrant was $(1,828) for the year ended December 31, 2024.
At December 31, 2024, the balance of the Senior Note was comprised of:
In January 2017, the Company completed the offering of $2.4 million principal amount of promissory notes (the “Notes”) convertible to Common Stock at $0.50 per share and warrants (the “Warrants”) to purchase up to 2.4 million shares of the Company’s Common Stock at an exercise price of $1.00 per share, subject to adjustment. In 2018, $400,000 principal amount of Notes was converted into 800,000 shares of the Company’s Common Stock, in January 2019 another Note in the principal amount of $50,000 was converted into 100,000 shares of the Company’s Common Stock, and in August 2019 another Note in the principal amount of $50,000 was converted into 100,000 shares of the Company’s Common Stock, leaving principal amounts of Notes of $1.9 million outstanding as of December 31, 2019. Holders of Notes in the principal amount of $775,000 extended their maturity date to January 31, 2023. In February 2020, $1,275,000 principal amount of the Notes were repaid in conjunction with a new financing leaving a principal balance of $625,000 of subordinated convertible notes outstanding due January 31, 2023. In April 2023, the holder of $50,000 principal amount of the subordinated convertible notes were repaid by the Company leaving $575,000 outstanding, $425,000 of which have been extended to May 31, 2025 or the repayment of the Senior Note, whichever comes first. The original $150,000 notes that were not extended and the $425,000 that were extended to May 31, 2025 are not delinquent because the holders subordinated those to Corbel and Corbel says they cannot be paid until their loan is paid. These Notes bear interest at 10% per annum, including the Notes which have not been extended, paid quarterly and are convertible to Common Stock any time prior to maturity at the option of the holder at $0.50 per share, as adjusted per the terms.
Placement agent fees and other origination costs of the Notes were deducted from the carrying value of the Notes as original issue discount (“OID”). The OID was being amortized over the term of the Notes. The OID was fully amortized in early 2022.
Total cash and non-cash interest accrued on the Company’s indebtedness in 2024 was $1.62 million and in 2023 was $1.74 million. |